5 Key Investment Criteria
Hi, my name is Jason Kennewell. Over my years of investing property, I’ve actually developed what I think are quite specific criteria for finding high return investment property. Whenever I look at an investment property for myself or my clients, it has to meet my five property searching criteria, and that’s what this short webinar is about today. So let’s take a look at what these five criteria are.
Firstly, growth potential. I want to know what the likelihood of future growth is. Limited supply. Does demand outweigh supply or is there a built-in limit that will push the market higher? Strong rental yields. So what is the rental market like? Which actually forces the rental units up. Affordability. How does the property compare in the market to the competition? And tax effectiveness, and is it the most tax effective strategy? So let’s get into each of these points in a little more detail.
So growth, capital growth, potential. We have to determine really where the subject property sits on the property clock. It can’t have already peaked. That’s pretty straightforward really. We have to get in at the bottom of the cycle just as it starts to swing past basically 6 o’clock on the property clock, so there’s plenty potential of upside left, earning potential upside. So this really takes research. It needs time, and it needs effort, but it’s an absolute must. You must do your research. So read the materials that you get supplied from local real estate agents or some other experts out there that you’re getting it from and check that it’s true. Check that it’s actually accurate.
The internet’s made that much easier for you. I also think that it’s important to avoid short-term areas like boom areas, like mining areas. There are too many ups and downs. And mining companies and big companies like that that rely on an area that’s relying on one real major industry, they can come and go and totally out of your control, so I pretty much just avoid them altogether.
The supply versus demand is vitally important. I think you have to take a good look at what the supply in the future is like. Population growth over time, very important to look at. Local counsel sites, certain bureau of statistics or the ABS, core logic, realestate.com, domain, all of those kinds of websites, they’re all very good sources of information and real easy to look up. The local economy is another great indication. Look at what people there, that are actually living there, actually do for a living. What is the unemployment rate? What are the forecasts for future employment in the area? And then really, infrastructure is another big one as part of that. Are there any current infrastructure projects underway right now or in the pipeline, in the future?
Number two, criteria number two is limited supply, which we just touched on there with capital growth. Again, there’s only so much land that is available, and you can’t make anymore of it, so when you’ve run out, that’s it. So this is why land, I think, has consistently gone up in the medium and long-terms, and that is why I favor property with land content over apartments. And apartments can spring up like mushrooms, and we’ve seen that happen in basically all the capital cities, and particularly Melbourne, Sydney, and in Brisbane. They can pump so much supply into the market that it has to suppress growth. It just has to.
The next one criteria is strong rental yield. A yield is absolutely critical for an investment property. I think that the key to solid yield is to ensure that the property appeals to a really wide cross-section of tenants. It’s a good idea to research who your prospective tenants are and ensure that the property meets their needs as best as possible. So really know your tenants. Know who you are going to rent to, and make sure that the property is actually going to rent to as many of those as possible. Make sure that the location has easy access to good facilities, plenty of leisure facilities, lifestyle kind of stuff, restaurants, outdoor areas, shops, transport. Make sure it’s good quality construction, good liveability and design features. They are all good drivers of yield.
Affordability. By affordability, I mean that the property is actually priced around the median price for the suburb. It’s usually easy to rent and resell in the future. I would always add to that it’s really important to research the area again though. I’m gonna keep coming to research, but you cannot just look at a median price in isolation. It’s just silly. And I know plenty of areas that use a two and a half kilometer radius. I can think of plenty of areas that have got prices between $450,000 and $2.5 million. What do you think that median price looks like? So the median can be quite misleading on its own. You can’t just look at it in isolation. Do your research. Get to know the market. And all that is so easy now with the internet. With the way the internet is, with the tools you have available online to you, use them.
Another thing there is, buy the right property. The majority of tenants won’t rent a castle, so don’t buy one for an investment property. You just will have small trouble renting it. And having said that, I do think that it’s actually a good idea to spend a little more to get better property, so it does actually stand out from the crowd from a rental and from a sale point of view in the future. And let’s face it. As an investment property, you are going to sell it at some point in the future. So don’t just build what I kind of refer to as a box with a lid. That’s what everybody else is doing. That’s what the builders are offering. That’s what they say is on the market or what all the builders and all the agents tell you that people want.
Do the opposite. I think do the opposite to that. Do something that’s a little bit special, something that actually stands out. You don’t have to spend that much more for property and sometimes not even any more for a property that actually is not just a box with a lid.
The last of my five criteria there is tax effectiveness and pay less tax. And who wants to pay the taxman as much as possible? The truth is nobody does. So particularly in our current tax climate, it’s most desirable to invest in newer property. It actually offers the maximum in depreciation benefits in buying an older property. Once they particularly hit the 10-year mark, you’ve really got to look at actually spending quite a bit of money to actually bring the depreciation back up. It doesn’t appeal to me, and I don’t really see a lot of sense in that, spending more money.
So put quite simply, this actually translates into significant tax savings for you. I can give you much more detail of this on a detailed property investment analysis, so we can actually break down what a real property looks like with your circumstances inside our property investment analysis.
So having said all of that, property that meets all of these five criteria is not easy to find. It’s not always easy to find, so I know that I have Haselan packages in Park Avenue residences, which offer very attractive mix of the five criteria. They have great growth potential with high demand and low supply and getting lower. Great location with exclusive and close, exclusive facilities close to amenities that buyers and tenants actually want and need. Limited supply, the location has a median to long-term limit to it’s supply, which I do actually go into much more detail in a South East Queensland Regional Plan short webinar that you may have already seen, but if not, keep an eye out for it.
We have great yield and consistently low vacancy rates, and that provides a great cash flow, positive cash flow. The vacancy rates on the Sunshine Coast have been consistently 1%, and in Peregian Springs itself, where Park Avenue residences sits, they are consistently below 1%. Haselan packages priced around the median price in the suburb. It’s a good thing. Brand new architecturally designed homes, and as you can see, there’s some examples here I just put up on the screen there for you. A little bit special, a little bit stand-out from the market, and those homes are designed to appeal to the wider market. We offer all our investors a zero maintenance and property management service for one flat fee per annum, which is an all in one investment package.
So to finish off, I just wanna say that I am actually a property investor. I actually do understand what investors want and need. And I understand the issues that investors face during the buying process and throughout the life of owning property, so I get it. I understand. I know what you’re trying to achieve, and I am sure that I can help. If you’d like to actually have a personalized property investment consultation, then please do follow that link there customproperty.com.au/1-on-1. Pop that in. Book a time. Let’s have a chat. What have you got to lose? I look forward to talking with you. Thanks very much for listening.